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Mr Philip Hollobone (in the Chair)
Before we start, let me make it clear to all those assembled here that I am not late; I am the emergency replacement in the Chair. It is an honour to be here this afternoon for the debate in the name of Mr Jeremy Lefroy.
Jeremy Lefroy (Stafford) (Con)
Thank you, Mr Hollobone. It is an honour to serve under your chairmanship. I would like to draw attention to my various entries in the Register of Members’ Financial Interests. The debate is about supporting job creation in developing countries and much of my working life has been spent in that area, so it is inevitable that I have some interests to declare.
Last week, the Select Committee on International Development visited Sierra Leone and Liberia. In both countries, we had the honour of meeting the President. Both, without prompting, listed unemployment, particularly among young people, as something they needed to tackle, and tackle quickly. They see the need particularly clearly because of their recent experience of terrible civil wars that were fuelled by the resentment of people who had no real income, felt divorced from any development taking place in the country and saw an elite disconnected from the needs of the population. As a result, they are both determined to do whatever they can to avoid that situation arising again. As the UN says in another context: create more jobs or risk unrest.
Fiona Bruce (Congleton) (Con)
I commend my hon. Friend and colleague on the International Development Committee for his dedication to this subject and for bringing forward this debate. Does he agree that in Rwanda we now see a genuine example of job creation, growth and stability, which has come out of a very traumatic period for that country, proving that that can indeed happen?
Jeremy Lefroy
I am most grateful to my hon. Friend for that intervention. She is absolutely right. Of course, in Rwanda people would say that they have much further to go. They want to concentrate on developing the skills of their population, and in particular young people. They are looking at, for instance, the IT sector, because Rwanda is a landlocked country without large natural resources, apart from its own people and the beauty of its landscape. As I said, my hon. Friend is absolutely right.
High levels of unemployment or underemployment, especially among young people, are a problem in most countries in the world. When we ourselves have a youth unemployment rate approaching 20%, we recognise that this is a shared problem and there may well be—in fact, there should be—shared solutions. It is estimated that 1 billion additional jobs will be needed in the next decade for those who are currently out of work and those who will be coming into work over that time. Throughout my remarks, I shall use the word “job” to include self-employment and work in the informal sector, particularly in agriculture.
David Simpson (Upper Bann) (DUP)
I congratulate the hon. Gentleman on obtaining the debate. Does he agree that although it is vital that jobs are created—that is what this debate is all about—in order to achieve that for small and large businesses, it is important that the infrastructure of those countries needs to be improved dramatically? Would it be an idea for moneys donated from the United Kingdom to these countries to be focused on certain areas to help to create jobs for young people?
Jeremy Lefroy
I am most grateful to the hon. Gentleman for his wise intervention. Later I shall come to the issue of infrastructure—he is absolutely right about that—and give one or two examples of where it has made a huge difference.
To return to the point about the word “jobs” including the informal sector and self-employment, we have to remember that if we define “jobs” too narrowly as those where people enter into paid employment, we will be missing the point. That is a fairly small percentage of the total amount of work available in the world at the moment.
Alok Sharma (Reading West) (Con)
I, too, commend my hon. Friend for the enormous amount of work he does, not only on the Select Committee but elsewhere. Of course, he has huge knowledge of this subject and many developing countries. He talks about jobs in a wider sense. Does he agree that another key issue for many of these economies is access to finance? Of course, access to finance for businesses is a big issue in this country, but it is a particular issue in this context, too. Perhaps he will talk later in his speech about some of the issues—or some of the solutions that have been found—with improving access to finance for individuals who want to start businesses.
Jeremy Lefroy
My hon. Friend and the hon. Member for Upper Bann (David Simpson) have obviously read my notes in advance—either that or they are most prophetic—because I will come on to that subject in a moment.
Jobs, in the widest possible sense, will need to bring in more than merely an income on which people can barely survive. The World Bank has set two goals for 2030: to eliminate absolute poverty, which is vital, and to promote inclusive growth by concentrating on the lowest-income 40% in each country. I commend the World Bank president, Dr Jim Yong Kim, on his relentless focus on that. He sees that we must not only eliminate absolute poverty, vital though that is, but raise the living standards of everybody, particularly those at the lowest end of the income scale.
Fiona Bruce
My hon. Friend is being generous in giving way so much. Does he agree that one way to raise the living standards of the poorest is to ensure that women in some of the poorest communities in Africa have the opportunity to develop businesses and access finance, even if only small amounts of finance? All the evidence shows that when women are given such an opportunity, the benefits of their businesses are returned to their local communities and are exponential.
Jeremy Lefroy
My hon. Friend is absolutely right, and I will say a little more about that. It is vital that those benefits are spread throughout the community. Let us not forget that since the International Development (Gender Equality) Bill, which was introduced by my hon. Friend the Member for Stone (Sir William Cash), received Royal Assent a couple of months ago, Britain’s international development work must now show equality towards men and women, boys and girls.
Work at subsistence level may take someone out of destitution, but it will not bring inclusive growth. That is not to say that subsistence work is pointless, but we must aim higher. As the head of the International Monetary Fund, Madame Christine Lagarde, has said, in far too many countries the benefits of growth are being enjoyed by far too few people. There are ways in which we can help to counteract that, and the Department for International Development does so. One way is to promote fair trade, which began in agriculture but has spread through a number of industries, most recently the garment industry. DFID has done some excellent work in Bangladesh on labour standards among garment workers, together with the British companies that those companies supply. As my hon. Friend the Member for Congleton (Fiona Bruce) has said, it is vital that such work extends throughout the community, particularly to women. As she rightly says, they will probably reinvest the most back into their communities, because they see that as the best safeguard for their children and families.
Let me set out briefly how I believe we can support developing countries to create the jobs that they and we need—our economies are increasingly interrelated. The UK continues to run a large trade deficit, and one of our best hopes for dealing with that lies in trading with developing countries as they grow. I will start by setting out something that I take for granted: a stable and secure state and an economy that is relatively open to the private sector are essential, given that 90% of jobs in the developing world are created in the private sector. Work to improve security and economic governance helps to develop an environment in which jobs can be created. DFID is doing a tremendous amount of work in that area, and I commend it on that. However, I will not dwell on that, because it is the subject of another debate.
A large number of the 1 billion jobs that are needed will, at least initially, be in the informal and agricultural sectors. In 2018, 63% of jobs in developing countries are forecast to be in agriculture still, which will represent a fall of only 8% since 2000. Industry will account for 10% and services for 27%. That is why I believe that one of the most important ways of supporting job creation in developing countries is to teach business skills at school. If most students will be earning their living in some form of self-employment, whether in agriculture or informal sector services, it makes sense to give them the right tools.
Last week in Liberia I met graduates and teachers of the Be the Change academy from Paynesville. Along with David Woollcombe, one of the founders of the organisation, I met Zuo Taylor, who runs the academy’s operation in Liberia, and some young British volunteers who were there as mentors and supporters on the programme, which was exclusively for young business women. I met two young women who had just finished the course, Manjee Williams and Mattee Freeman, who both had businesses already, one as a hairdresser and the other as a caterer. Both said not only that the training and support they had received would help them to organise and run their businesses in a more professional way, but that it had enabled them to consider giving work to others. The caterer already employed several other people—six, I believe—and planned to employ many more.
I believe it is vital to teach self-employment skills not only in schools in the developing world, but right here in the UK. That is done, and it is often done well, but it is supplementary to the curriculum rather than an integral part of it.
Fiona Bruce
My hon. Friend and I have experience of teaching business skills, in Rwanda and Burundi. Does he agree that there is an enormous hunger on the part of those who are in business or starting up a business in Africa to learn such skills? Does he also agree that there is a real opportunity, which we need to highlight, for those who have been in business in this country to help to mentor and support growing businesses in Africa, whether by travelling there or by using electronic communication? We must focus on that and encourage it much more.
Jeremy Lefroy
My hon. Friend is absolutely right, and it has been a great privilege and pleasure to share that work with her over the past few years. I reiterate that I believe such work to be essential for the UK as well. It is not simply a matter for developing countries. As I have said, we must learn from some of the work going on elsewhere in the world, and I believe we must integrate that sort of business education into our schools. We are not talking about sophisticated business education; we are talking about basic skills that are relevant to the self-employed or those in the informal sector. Many of our young people who are at school will end up being self-employed or working in the informal sector; that is true more than ever in the modern economy. We need to give them those skills, not just through excellent programmes such as Young Enterprise—I am proud to support that programme in my constituency, and I have no doubt that several colleagues do likewise—but as a core part of our curriculum.
One might argue that such training has little relevance to someone involved in small-scale agriculture, but I absolutely disagree. I have seen many examples of how farmers who have just a small amount of land can, using business acumen, create vibrant businesses that are based on agriculture, but go beyond it into activities such as food processing, retail and feed manufacture.
Alok Sharma
My hon. Friend has a huge amount of experience of working in Africa, and in some ways the continent is an untapped resource for business links. I will be speaking at the Afro Business Expo, which is taking place in the Thames valley in a few weeks and which I believe UK Trade and Investment is supporting. Does he agree that, as individual Members of Parliament, one of the things we can do is to encourage such events that enable businesses from African countries to come and meet businesses here? Such events will provide an opportunity for creating jobs not only in the UK but in developing nations.
Jeremy Lefroy
I absolutely agree with my hon. Friend. Such events are vital. The more connection we have with markets in the developing world, the more we can trade and invest—both ways, these days—and the closer our relationship, the better. That is why I welcome DFID’s focus on livelihoods and on bringing in British business. My right hon. Friend the Secretary of State took British businesses to Tanzania to help with development work in that country through enterprise. That is absolutely vital.
My hon. Friend the Member for Reading West (Alok Sharma) has already mentioned finance. Once someone wishes to start a business, or take a business on to the next stage, they soon find that the next obstacle is finance. Banks provide very little credit to businesses other than those that are well established and fairly large. One might think that that is a familiar refrain even in this country, but what is true of this country is far truer of developing countries, where it is almost impossible for anyone other than a fairly well established, medium to large-sized business to obtain much credit from banks. There are various reasons for that. Bank overheads are high, which means that minimum loans are often far greater than the loan required by a business because the banks need to generate enough income from the loan to sustain their overheads. Bank salaries in some developing countries are not far short of bank salaries in this country, certainly at branch level.
In my experience, banks are also reluctant to lend without substantial security, which is often worth far more than the value of the loan—perhaps 200% of its value. Indeed, central bank rules in some countries may make that compulsory, so any business that does not have a lot of additional security to offer against a particular loan is almost shut out of the market.
Additionally, in countries where the Government run a substantial deficit and dominate bank borrowing, it is often safest and simplest for banks to buy Government bonds. As we learned last week, until recently that was the case in Sierra Leone, where Government bonds were offering something like 30%, well above the rate of depreciation, so it was easiest and simplest for the banks to sit back, buy Government bonds and watch the money come in. There was no need to take the risk of lending to small or even medium-sized businesses.
Of course, there are many good initiatives that assist the provision of finance to businesses in developing countries, although at the moment those initiatives provide just a fraction of what is necessary. Microfinance has been around for some time; although people tend to think of it as more about lending for consumption, microfinance has increasingly been involved in lending to micro and small enterprises—MSEs—as well as for personal consumption, which I am glad to see. This morning I was speaking to the chief executive of a microfinance bank based in Botswana that has operations all over sub-Saharan Africa and is now entering the MSE market.
Fiona Bruce
My hon. Friend may remember that we visited the Women’s Initiative for Self Empowerment, the establishment for microfinance in Bujumbura. The initiative informed us that, because of the personal relationship between the women who borrow small amounts of money and the administrators of the lending, the default rate is very low. Should that not encourage us to look further at such microfinance organisations, and perhaps to encourage them through DFID?
Jeremy Lefroy
My hon. Friend is absolutely right. The default rate is often lower in such organisations, which rely on a substantial element of trust, as well as on prudent lending and investigation of borrowers. We have seen that default rates of less than 5%, considerably lower than some banks take, are common. Default rates are sometimes as low as 2% in such organisations.
There is also internet-based lending, which is increasing substantially. We see that in this country with peer-to-peer lending, but there are also organisations such as Kiva and Lend with Care, which is run by the charity CARE International. Such lenders typically provide very small loans in which donors from across the world can invest as little as £20 or £30 in loans to MSEs. Such is the power of technology these days that they are able to run such schemes without extremely large overheads.
Furthermore, there are initiatives such as DFID’s programme in Pakistan in which local banks, as we saw, were given a guarantee by DFID so that they could lend to businesses. That means that DFID does not have to do the lending itself, but, as the risk is taken out of the lending, a local bank is able to lend to businesses to which it would not otherwise have lent.
In this case, I believe the guarantee of some £10 million, if I remember rightly, was not drawn on at all, which shows it was an excellent example of lending at no cost to the British taxpayer, with the British taxpayer giving a guarantee. Banks will still carry out the same degree of due diligence, but the guarantee gives them a bit of extra confidence to go and lend to businesses to which they would not otherwise have lent. The key in all those areas is to find cost-effective ways of reducing risk so that financial institutions are prepared to lend, or investors are prepared to commit equity, to a project.
I will mention one particular fund because I have personal experience of being an investor in a company that took advantage of it some years ago. The Africa Enterprise Challenge Fund was set up under the previous Government, with substantial funding from DFID—I believe that DFID currently funds more than 50% of the entire fund. The fund focuses on investments of which the primary beneficiaries are people earning less than $2 a day. Those people may be suppliers to a business or consumers who now have access to a reliable source of seeds or fertiliser, for instance. The fund matches the entrepreneur’s investment up to a certain amount. In Sierra Leone, we visited a chicken farm that is expanding production through support from the AECF. One of the new investments was a modern feed mill that will not only improve the quality of feed, and hence chickens, which have hitherto been imported, but provide a regular customer for many small farmers from whom maize and other crops are purchased.
The AECF effectively acts as a catalyst, and its various funds now total more than $200 million. I have said in the past in the House that I believe that the AECF should provide less in the form of outright grants and more as returnable capital, loans or equity, which can be reused to help other businesses. I am glad to see in the latest figures that just over half the funds advanced by the AECF have been loans, and I encourage it further to increase that proportion because the more it does, the more that can be recycled in to other businesses. If a business is successful, it is right that those who have helped it—in this case, the British taxpayer and taxpayers from other countries that contribute to the fund—should share in that success.
I now come to the point well made by the hon. Member for Upper Bann. Without adequate infrastructure, it is almost impossible for businesses to grow and reach their potential. I recall visiting a road project in the Democratic Republic of Congo near Bukavu with the International Development Committee. The project was substantially funded by DFID, and the road was connecting Bukavu with a town several hundred kilometres away that had been cut off from the rest of the world for some 20 years. That town is not small, and people travelled from there to Bukavu, one of the major population centres of the Democratic Republic of Congo, with great difficulty.
We travelled on the first 60 km to be completed, and people told us that it now takes just two hours for people, generally women, to bring their produce to market in Bukavu, whereas previously it had been a five-day walk carrying produce, in which time a lot of the produce probably would have gone off and become unsalable. The road project is a clear example of rural infrastructure that directly benefits farmers and the rural poor and creates jobs in the widest possible sense. There are many other examples, but that is the clearest example I have seen in which so much difference has been made in such a short space of time.
We heard that Sierra Leone and Liberia have some of the highest electricity prices in the world. That is extraordinary in countries where income is so low. Capacity is another issue. There are many countries in which the entire generating capacity is a fraction of the 900 MW output of Rugeley power station in my county of Staffordshire. As far as I know, Rwanda has less than 500 MW of output, and we were told that Sierra Leone has less than 100 MW of output, although it is currently building more capacity. Those substantial countries have electricity supplies on which a medium-sized town in the UK would not be able to survive. Without electricity, business clearly cannot flourish, and jobs cannot be created. Of course people can buy generators, but as anyone who has ever run a generator will know, the cost is prohibitive and adds enormously to the cost of doing business.
One final infrastructure issue is ports, which are a hindrance in many countries instead of an asset. We can see how, for countries that have invested in ports and run excellent ones, they become an entire competitive advantage in themselves; I think of Singapore, which has become a hub of trade in the far east and globally. Almost anything going in that direction transits through Singapore. I think of one or two ports in the middle east that have been developed into enormous entrepôts. Earlier still, the classic example in Europe is Rotterdam, through which effectively everything transited. We lost a lot of trade to Rotterdam because we were not fast enough in developing our own ports here in the UK, although that has been reversed to some extent since.
There are a number of problems with ports, not least corruption. I have personally experienced the problems with theft and corruption in ports, but it is clear that many ports are simply too small: they need more quays and they need dredging. The difference that better ports can make to job creation and business is enormous, particularly for landlocked countries. Many countries in sub-Saharan Africa are landlocked. In order to give them access to markets, the countries that house ports have a business opportunity, but also a responsibility, to make those ports as efficient as possible. It is estimated that sub-Saharan Africa needs a minimum of $100 billion a year for its infrastructure, and that the whole of Asia needs perhaps $1 trillion. Given that total overseas development assistance is less than $150 billion a year, it is clear that such investment can be done only through Government and private financing.
That is where initiatives such as the Private Infrastructure Development Group come in. Today I checked the results of that initiative, which was set up by the previous Government and continues under this one. The 2012 report stated that 39 projects were operational at the time, employing about 200,000 men and women in their construction and operation and providing services to 97.6 million people. Every $1 contributed by members through the PIDG facility—I am proud to say that the UK is by far the biggest donor—mobilises $39 in finance from other sources for projects. That is a tremendously effective use of money. Even if we take some of the figures with a little scepticism, as I always do, we would have to be extremely sceptical not to acknowledge that that is good value for taxpayers’ money in terms of the return created and the jobs generated.
I will come to the end of my remarks fairly shortly, but I will touch on a few areas that I believe are extremely important to supporting job creation in developing countries. The first is agriculture. We have already heard how many people are employed in agriculture in developing countries, but what must we do to make it work for them so that it is much more than just a subsistence livelihood? We need to help them invest in productivity. I have spoken about productivity before, as have others in other debates, so I will not go into it in great detail, but the issue is about processing, both on-farm—much is lost through poor processing—and post-farm, when raw food is made into finished products that can be sold. Post-farm processing creates a tremendous number of jobs. When we were in Afghanistan, we noted that many raw products from Afghanistan were going to Pakistan for processing and then coming back to Afghanistan in processed form, so we encouraged Afghanistan to invest in its food processing facilities.
Marketing is also important, as are land rights, which come up time and again. Land rights are essential to developing an economy. We have mentioned on a number of occasions the excellent DFID programme in Rwanda in which some 10 million plots of land were given titles, meaning that people have security over their land and can invest in it. They are therefore able not only to borrow against it but to gain additional productivity from it.
Green jobs are also relevant, and not only to the UK and developed countries; they are important in developing countries, because they link sustainability and growth. I was pleased to see that one of the more recent infrastructure projects funded through PIDG was a solar farm in Rwanda. Sometimes one wonders whether solar farms built in the UK are of much use, although I am glad to say that, over the weekend, I was able to have a couple of baths from the hot water solar panel on the roof of my house, even in Staffordshire. However, in countries such as Rwanda that have the benefit of the sun, it is great to see projects such as solar farms being developed to provide low-cost electricity for tens of thousands of homes.
Another way of encouraging job creation that might seem slightly difficult, particularly to those of us on this side of the House, is tax creation. You might share with me, Mr Hollobone, a scepticism about whether collecting taxes can create jobs, but I believe that it does, as long as it is done fairly and rationally. There are a number of reasons why. First, it creates a level playing field. Many countries that I have seen have an arbitrary way of collecting taxes. For various reasons that I will not discuss, some businesses are let off paying the whole amount and others are penalised, perhaps because they are more honest. A proper tax collection system should be neutral. It should enable everybody to flourish in the right way, paying what one would hope is a fairly low rate of tax while contributing to the benefit of everybody.
Secondly, taxes fund security and good governance. As we said at the beginning of this debate, without good governance and good security, business cannot be conducted. Finally, taxes fund public services. To refer again to the remarks made at the beginning, education is absolutely critical to the success of business, as is a health system in which people are looked after so they do not get sick with malaria every other week and go missing from work or, if they are self-employed, end up destitute because they simply cannot get out into the fields.
I have not attempted to do more than provide a brief overview of what I see as the most important areas in which job creation in developing countries can be supported. I have spent most of my working life trying to support it; I remember that when I first went to Tanzania, the business that employed me had about 20 employees. My ambition was that it should have 100 employees after four years, and we succeeded. We had some ups and downs afterwards, but by and large, that was my biggest source of satisfaction: not necessarily the bottom line, but the fact that more and more people—hundreds and hundreds—could get a livelihood from the kind of work in which we were involved.
The stakes could not be higher. If we solve this, we will solve so much else in terms of peace, security, development, the elimination of poverty, and shared prosperity for both developing countries and, as I have said, for ourselves. It is not beyond us, with committed and visionary leadership.
Mr Philip Hollobone (in the Chair)
If the House was not aware previously of how much the hon. Gentleman knows about international aid, it will certainly be now.
Alison McGovern (Wirral South) (Lab)
Mr Hollobone, I think I express the views of everybody in this debate in offering my thanks to you for stepping into the breach and chairing so ably. I also congratulate the hon. Member for Stafford (Jeremy Lefroy) on securing the debate and on his contribution. It was my pleasure to serve with him for a time on the Select Committee on International Development; his contributions then were always thoughtful, considered and expert. I have learned even more about the subject by listening to him just now.
Harold Wilson, who went to school in my constituency—in fact, he went to the boys’ school near the girls’ school I went to—said:
“Unemployment more than anything else made me politically conscious.”
In that regard, I want to make a few remarks to take forward the comments the hon. Gentleman concluded with.
The hon. Gentleman talked about economic development in its broadest sense and about the interconnected nature of what makes an economy work. It did my Merseyside heart good to hear him talk about the vital importance of ports to our infrastructure. That is not a glamorous thing to say—when we talk about infrastructure, people often think of big bits of railway—but ports are vital, in this country and others. However, I want to restrict my remarks to aspects of job creation that relate to the work DFID does and to the work I think it should do more of. In that regard, I have a few comments to make and some questions to put to the Minister.
I think we all start from the assumption that private sector growth is a good thing. It is especially good if it represents a structural shift in a country’s ability to feed its population and to take care of itself. In that regard, the hon. Gentleman’s comments about infrastructure capital expenditure are vital. However, although private sector growth is necessary, it is not sufficient in itself for development to occur. People in a poor country will have greater freedom only if other conditions are fulfilled.
Does growth help the poorest? For those in work that is vulnerable, there is a clear link between the insecurity and threats a country faces and the extent to which economic growth helps those closest to the bottom. It stands to reason that those who do not have much to live for would risk their lives by engaging in military combat. The more we can do to give people the possibility to develop themselves and their families, the safer the world will be.
Does growth reduce inequality? Not necessarily. However, we must surely seek to ensure it does, if we are to have a fairer and more just world. In that regard, it is important that we see no return to aid conditionality—to the old days of aid as a byword for helping so-called British companies do business in other countries. I am afraid there has been a slightly worrying return to language referring to the UK as an aid superpower, as if our international development work with other countries is purely about self-interest, rather than an enlightened self-interest that reflects the virtues of being on a more even playing field with others.
Does growth involve the diaspora? Okay, DFID has done some work with FTSE 100 companies, but what about businesses in this country owned by people from poor countries in Africa and elsewhere?
My final condition in terms of determining whether private sector growth is good enough to bring about true development relates to environmental sustainability. If infrastructure investment is done in the right way, it can be absolutely crucial—solar farms have been mentioned. The world can choose whether to grow in a way that is healthy; some of the mood music from parts of the Government has been less than positive about the green agenda. I would not dream of using the kind of words that have been used about it, but I am sure the Minister knows what I am referring to.
To conclude, I have some specific questions. On job creation, the Minister will realise there is a serious risk of deadweight loss if projects that work with the private sector create jobs that would have been created anyway. What research is DFID undertaking to ensure that any investment in or for the private sector is genuinely additional and does not simply move jobs geographically or recreate ones that would have been created anyway?
Secondly, what policies is DFID pursuing to help meet the decent work indicators in the millennium development goals? It is clear that we need to reduce the number of people who are working and in poverty and, specifically, that we need to help young people and women. Half the world’s labour force is in vulnerable employment, so the agenda could not be bigger. Leading on from that, in how many DFID projects with the private sector does the Department monitor the quality, quantity and precariousness of the work created?
The Dutch Government require private sector use of their development funds to adhere to OECD guidelines for multinationals, including on industrial rights and workers’ rights. I would be grateful if the Minister commented on whether we intend to adopt the same standards as the Netherlands.
I would be grateful if the Minister told us whether there is any move in DFID to reconsider the short-sighted decision taken earlier in this Parliament to de-fund the International Labour Organisation. In some of the work I have done on the situation of garment workers in Bangladesh, the contribution made by the ILO’s advice and work has been irreplaceable, but the Government have decided on behalf of the nation to de-fund that organisation. Of course, the Minister may respond by saying that DFID Bangladesh has worked with the ILO, but that is not the same as the contribution we used to make to it. Will the Government reverse that short-sighted decision?
To conclude, I congratulate the hon. Gentleman again on raising this issue, which is vital to poor people who work hard and earn little, wherever they may be, as well as to the broader security of the world.
The Parliamentary Under-Secretary of State for International Development (Lynne Featherstone)
What a pleasure it is to serve under your unexpected chairmanship this afternoon, Mr Hollobone. You are a very welcome replacement. Thank you for enabling us to continue with the debate.
I thank my hon. Friend the Member for Stafford (Jeremy Lefroy) for securing such an important debate. In his opening remarks, he said he had just returned from Liberia and Sierra Leone, which listed unemployment as their biggest challenge, and DFID also believes that is the case. Jobs are at the core of international development, and I very much welcome the opportunity to discuss the issue. I am aware of my hon. Friend’s vast experience and great knowledge in this field—it is much greater than my own—which comes from his personal experience of living in Africa and being involved in business for many years.
I hope many of the points in my speech will address some of the issues that have been raised. If we have time, I will try to address some of the more specific points that have been raised. When we ask people in the UK or in a developing country what they want, the desire for a good job is normally one of the top things on their list—that is not rocket science. A job will allow them to work their way out of poverty, to provide opportunities for their families and to build for a better future. I always think that having something to do and somewhere to go every day is also good for keeping a person whole in mind and body.
Since I became a DFID Minister, there is something that has struck me about virtually all the African countries I have visited—and I have been to Africa perhaps 20 times now. Driving up the road—if there is one—at certain times of day, one can see that many young men are sitting at the roadside without anything to do. That is a reminder of something that has already been raised in the debate: how important and necessary work is and how much work is missing.
I want to highlight the scale of the challenge in developing countries. Most of the 600 million new jobs needed globally by 2020 for the growing working-age population are needed in developing countries, but at the moment only 15% of people in low-income countries in Africa have what we would call a proper job. There are 900 million people in developing countries who are working but who, as my hon. Friend the Member for Stafford said, are doing vulnerable self-employed work and living in poverty. They engage in subsistence farming and so on. Most people in developing countries have a job of some sort, but it is mostly in unproductive subsistence work that may even be unsafe.
To address those issues in the terms in which DFID thinks about jobs, we need modern, formal sectors to grow and to create better jobs. We need people who work in subsistence agriculture or unproductive household businesses to be able to earn a better living. I have visited some impressive projects to intensify and maximise the produce of small agricultural plots. Avoiding the loss of produce in getting it to market is one way to do that, but I also remember a market in Zambia where we had arranged for people selling seeds and market produce to meet small subsistence farmers to exchange knowledge of the best seeds and how to plant. There was a product to make cows grow, so that people could get them to market in two and a half years instead of seven. I did not ask what was in it; nevertheless, someone with one cow could triple their income with that product. Many of these people are in marginalised rural areas or cities, poorly connected to markets for their labour. They lack the right mix of skills, finance, land and information to enable them to find a job. My hon. Friend the Member for Stafford also talked about getting goods to market, the skills needed to get a job, access to finance, surety of land tenure and information about how to maximise produce.
We also need to address serious inequality in who gets job opportunities. Women are less likely to participate in the labour force and are more likely to be in unpaid or vulnerable work. Young people—and there are many in developing countries—also fare badly, which often poses a risk to social cohesion. That is not just unfair and dangerous; it is inefficient and represents a huge potential loss to developing economies. Changing this jobs picture requires economic development and transformation, much of which will be led by the private sector. People need the opportunity to earn more. For many, that will mean getting better incomes in agriculture, but over time—indeed, already and increasingly— the bulk of new jobs will come from higher-income opportunities in services and manufacturing, as has happened in every country that has successfully developed.
DFID’s work on economic development and jobs involves, first, getting the international system right; secondly, getting private sector growth going; and, thirdly—an absolute priority for me—ensuring that growth is broad-based and inclusive, in particular for girls and women. One example is the recent trade facilitation agreement reached in Bali, which will be instrumental in reducing the barriers to trade, helping to integrate developing countries into global trade flows and promoting jobs and investment. We are also pushing for productive jobs to feature prominently in the goals and targets of the post-2015 agenda, which is essential if we are to reach zero poverty by 2030. Our multilateral partners are also well placed to deliver on the jobs agenda and are upping their game. The UK-backed International Finance Corporation global SME finance initiative aims to provide at least 1 million new jobs and financing to 200,000 small and medium-sized enterprises. Access to finance is crucial, and I have just been in Mozambique, where I launched access to finance for women in SMEs. It is a crucial stage.
The World Bank Group has put job creation and economic development at the centre of its plans to achieve its goal of increasing shared prosperity and the income that accrues to the poorest 40% in each country. We are engaging closely with the bank on that. Across Government, the UK is also working to improve economic and trade relations. Our recently launched high-level partnerships for prosperity will improve trade between the UK and Angola, Côte d’Ivoire, Ghana, Mozambique and Tanzania—indeed, my hon. Friend the Member for Stafford mentioned the recent trip there by the Secretary of State.
Driving economic development and jobs is not only the most effective way to reduce poverty in developing countries; it is also in the interest of the UK. The hon. Member for Wirral South (Alison McGovern) raised the question of tied aid, and I assure her that there is no question of that. It is against the law and not appropriate. However, when we let contracts in open competition, a UK business will often win. That, however, can only be a compliment to British business and its ability to make the successful bid. There is no favouritism: the process happens on the open market and such contracts are always let competitively.
It is in the interest of the UK to build our future trading partners. Africa has a growth rate that we in the UK can only envy and there is phenomenal wealth lying beneath its ground. The challenge with extractive industries is to spread the benefits widely, as my hon. Friend the Member for Stafford said. One reason for the work we do on value chains and supply chains in extractives, and in the surrounding geographical area, is to try to link the economic benefit to the country. We also give technical support and assistance with the original contract negotiations, so that the country benefits from its own wealth, rather than other countries or the elites of that country.
Improving job prospects in developing countries, particularly for young people, reduces the chance of conflict. The recent awful case of the abduction of girls in northern Nigeria seems to have gone from the media pages, but it has not stopped being on our mind at DFID or the Foreign and Commonwealth Office. Part of the issue in the area where Boko Haram flourishes is that young men have nothing to do. I am looking at programmes to develop skills and jobs in that area, as possible diversionary tactics, which would also be very beneficial.
Many businesses in the UK are looking to Africa and Asia and seeing the markets of the future. Businesses see value in engaging with DFID and the rest of Government and they in turn have much to offer the countries that they choose to invest in. Interestingly enough, the business advisers to DFID’s advisory board have strongly called for exactly what my hon. Friend the Member for Stafford was talking about: the development of appropriate skills and education. There is a willingness to invest in countries and create jobs where the climate is stable enough, but there is also a need for skills, so that businesses do not have to import their own staff. A company that wants to open in many parts of a country needs to be able to use staff from the country in question to run branches, co-ordinate things and see to the logistics.
Our spending programmes create jobs in developing countries in a number of ways. The Commonwealth Development Corporation, the UK’s development finance institution, is having a huge impact on job creation in Africa and Asia. It is remarkable. In 2013, CDC’s 1,300 investee companies directly employed over 1 million people. That is a hugely successful rate.
Jeremy Lefroy
The Minister is absolutely right to point that out. I would further like to congratulate CDC; I understand that last year saw the highest level of investment by CDC in its history. That is a welcome sign of the success of the Government’s opening of CDC’s mandate, to include direct investment in businesses again, as well as investment in funds, and concentrating on low-income countries rather than spreading out through middle-income countries.
Lynne Featherstone
My hon. Friend makes an excellent intervention. CDC has gone from strength to strength. Not that long ago there were some question marks over it, but it has moved well away from that. As he says, because it works in the most fragile, conflict-affected and poorest of countries, its success is all the more remarkable. It has created more than 68,000 new jobs.
Alison McGovern
On that point, would the Minister be so good as to respond to my question about deadweight loss and what research DFID is undertaking to ensure that none of those new jobs represents such loss?
Lynne Featherstone
I will respond to the hon. Lady in a moment on the issue of deadweight loss.
Moving on from CDC, in the long term, the key to mass job creation is improving the environment for domestic and other businesses to invest and grow. DFID is focused on these long-term determinants of job growth.
David Simpson
As we believe that these projects and job creation are very important, does the Minister agree that we cannot overestimate the number of jobs that need to be created? I believe the figure is 95 million over the remainder of this decade, so time is of the essence. We need to move on this issue.
Lynne Featherstone
The hon. Gentleman is obviously right. We work in that direction and we are working as fast as we can to enable job creation to happen. I have covered a number of things, but part of what DFID does is on the enabling environment for investment and therefore job creation, whether that means cutting the time it takes to get goods across a border from four weeks to one day, or help with filling in forms or how long it takes to start a business—all the things that are very off-putting to investors. We are working on all fronts.
I do not know whether those hon. Members present have ever eaten in Nando’s, for example, but I was in Mozambique, where Nando’s exclusively grows its peri-peri peppers. It is a labour-intensive process, with massive work for smallholdings, done to a very high standard—because the standards, both of the product and how people work, are very important to DFID and the British Government—which means huge job creation. It is a win-win for the country, the company and the individuals who are being taught and looked after while they grow peri-peri peppers—and I can highly recommend peri-peri chicken.
DFID currently supports more than 60 programmes with specific targets to provide economic assets to girls and women in developing countries. We have set ourselves a target of helping 18 million women to access financial services and 4.5 million women to strengthen their property rights by 2015. Both will have a fundamental impact on the job prospects of the women involved by improving their control over assets and finance.
For some women in work, the conditions remain unacceptable. The UK is supporting the International Trade Centre to work with Governments and customs authorities in east Africa to improve conditions for female informal traders, who face harassment and extortion at borders—the example often given is someone who starts with 12 eggs and, by the time they pay off all the people who have to be paid off, has about three eggs left to sell. That is a common, everyday kind of factor.
The Department is also scaling up its work on education and skills—an important point that my hon. Friend the Member for Stafford raised—to make sure that skills are relevant to people’s changing opportunities and that the private sector is involved in designing, delivering and financing them. We are also increasing our work on infrastructure—my hon. Friend talked about power and transport—and thinking afresh about urbanisation, in order to create more and more productive jobs.
Jeremy Lefroy
My hon. Friend is making some extremely important points. One issue that I did not refer to directly in my speech—but which relates specifically to skills—is the great need for additional skills in, for instance, the health and education sectors, which are themselves financed through the development of the economy, the payment of taxes and so on. The hon. Member for Wirral South, who speaks for the Opposition, and I were both keen to see the International Development Committee look into health system strengthening. I am glad to see that that inquiry has now taken place. One of the things that I think will emerge from it is the enormous number of job opportunities for people at all skill levels in the health and education sectors, but of course those sectors have to be financed and the finance comes from the growth of the private sector.
Lynne Featherstone
That is absolutely the case. There are some benign circles that we need to get going in, for example, higher education in developing countries, because skills in health and education need to be supplied locally. We need to up the quality of teaching and professionals in the health service. Indeed, that is how we are moving forward, and I believe I will be giving evidence to the IDC on health system strengthening. The need is great, because the numbers are enormous and those jobs must be filled by training individuals within countries and not “borrowing” them, as has happened in the past.
As for monitoring and evaluating DFID’s work, we are scaling up efforts to monitor and evaluate the impact of our work on economic development. Some areas of this agenda, such as job creation, investment and trade, are quite complex to measure. The International Finance Corporation’s “Let’s Work” initiative, which DFID, CDC and the Private Infrastructure Development Group engage with, is working to develop an agreed approach to estimating the impact of private sector infrastructure interventions on job creation. DFID funded the IFC’s study in 2013 of the private sector and jobs, and a whole chapter is devoted to the difficult issue of measuring net additional job creation. Measuring it exactly is one of the challenges, but it is our ambition both to measure it and to ensure that the jobs being created are additional and would not have been created in any case.
Under the economic development scale-up, we are looking to increase the relevance of education and skills for the changing job market, as I have said. That goes for foundational skills and technical skills, so that skills taught in school and technical training institutes have to be right and join up what is needed for industry in the country with the skills that are available. New interventions for marginalised groups in rural and urban areas provide combinations of interventions, such as entrepreneurship skills and finance and innovative business models—we are trying to create another benign circle. I have visited some of the larger pilot entrepreneur skills awareness training projects, where an inspirational speaker talks to 700 or 800 young people at a time, who all seem absolutely fired up and up for going out and becoming entrepreneurs in their own right. It is very exciting work.
My hon. Friend the Member for Stafford mentioned power. The Public-Private Infrastructure Advisory Facility is delivering technical assistance to unlock private investment in developing countries and the EU is investing in the EU-Africa Infrastructure Trust Fund.
As for ports, in Mombasa in Kenya we are helping to tackle problems with port management to improve trade and regional integration. Most importantly, of course, as Mozambique’s ports develop, the corridors that will open up to neighbouring landlocked countries will be incredibly valuable, both to those countries and the ports themselves.
As for work, I hear what the hon. Member for Wirral South, my opposite number, was saying. I can assure her that I go to the International Labour Organisation every three months and I work closely with the unions. They have raised the issue of our stopping their funding many times with me. However, as I have explained, we work in different ways. We are working with them on a project on trafficking in Asia and we have given £4.8 million to an ILO programme to improve working conditions in the readymade garment sector in Bangladesh. That was launched in October to help to conduct safety inspections of the 1,500 factories that are not covered by existing initiatives and to help the victims of the disaster.
In a similar field, the trade and global value chains initiative encourages buyers, factories and workers to work together to improve productivity and working conditions. Our overarching message and narrative on working conditions—in all businesses and in all ways, and with Governments—is that they should be good and professional. It is no good a Department such as DFID not caring about standards; we care very much about standards and responsible business. We encourage companies to respect voluntary global standards, which improve labour standards and reduce harmful working practices. We provide funding and support that strengthens mechanisms that ensure that companies comply with their commitments on labour standards and working practices, such as the ethical trading initiative. We have also funded and supported the extension to the global fair trade system and are building evidence about its impact on wages and working conditions.
As for ensuring that poor people are not being excluded from any newly developed markets, which obviously is important, we support inclusive growth, benefiting women and girls in particular. That is an essential pillar of DFID’s economic development strategic framework. Although occasionally one sees “economic development” written in a report, it is always meant to read “inclusive economic development”. There is no point developing a country if the process is not inclusive, because if it leaves people behind, it will simply repeat the worst mistakes that have been made in other parts of the world. I am pleased that the overarching principle of the high-level panel report on the post-2015 agenda is exactly that. “Leave no one behind” is the most important message.
In conclusion, I thank my hon. Friend the Member for Stafford, who covered the issues and subjects in better detail, perhaps, even than myself. I think all hon. Members would say that we are all committed to the creation of useful employment and work and the improvement of subsistence work and agriculture. That is important, right across the developing world, because if we do not do it right, we will be guilty of leaving many people behind. Ultimately, it is in our own interests—in the country’s and everyone’s interests—that we get this right and support the developing world in the creation of the right sort of jobs, the right environment and the right economy.
Mr Philip Hollobone (in the Chair)
I thank all hon. Members who contributed to this important debate. I now suspend the sitting until 4 pm, or earlier if both the Member whose debate it is and the Minister responding arrive earlier.